A TechCrunch article: So, Recode reported today that Twitter was tinkering around with the idea of expanding its 140 character limit to a number a bit higher….10,000 characters. But what,...
Courtesy of CNBC:
Microsoft, Ikea, Marriott and Shop Direct are just a few of the global businesses boosting their spending on Facebook and in many cases shifting offline dollars to the social network.
Long past its days as a playground for app developers and niche commerce sites, Facebook is at the center of the media world with more than 2.5 million advertisers. Its ability to target and retarget 1.59 billion monthly users at the most granular level and with mobile video campaigns across its core site and Instagram propelled 57 percent ad revenue growth in the fourth quarter.
But there’s a trade-off. The auction-based system is sending prices soaring for the many smaller brands that, in recent years, counted on Facebook to develop a loyal following. With limited budgets, start-ups like mobile ticket retailer SeatGeek and online wedding registry Zola are struggling to get the same return on their investment, and moving their dollars elsewhere.
“It’s harder every month,” said Sam Arnold, senior marketing analyst at New York-based SeatGeek, which has primarily used Facebook’s app install ad to promote downloads. “It’s more expensive to advertise on Facebook than it used to be because big brands are starting to spend money in the mobile space.”
The average price of an ad on Facebook increased 21 percent in the fourth quarter from a year earlier, after 61 percent growth in the prior period. The biggest price jumps were in 2014 and early 2015 after Facebook rolled out ads in the news feed and redesigned its right-hand column to improve engagement.
Meanwhile, Facebook had been showing progressively fewer ads until the fourth quarter, when the number of ads served rose for the first time since 2013.
SeatGeek, which spends millions of dollars a year on Facebook, now allocates about 30 percent of its mobile ad budget to the social network, down from close to 100 percent originally. Arnold said prices on Facebook are 12 times higher than when SeatGeek started advertising three years ago. It’s moved most of the rest of its spending to Google and Twitter.
Wall Street isn’t the least bit concerned. Shares of Menlo Park, California-based Facebook surged 16 percent on Jan. 28, after the company’s earnings blew past estimates, and they’ve jumped nearly 40 percent in the past year.
Just how confident are investors that Mark Zuckerberg’s best days are ahead?
With a stock market value of $315 billion as of Thursday’s close, Facebook trades for 22 times revenue, by far the highest multiple among the 55 U.S. tech companies valued at $10 billion or more, according to FactSet. The closest is security vendor Palo Alto Networksat 12 times revenue, while fellow Internet giant Alphabet trades for 6.9 times sales.
From Facebook’s perspective, there’s plenty of room for the large brands and emerging players to coexist.
That’s because advertisers can get so specific in their targeting that they’re not really vying for the same user.
For example, a pizza parlor in Chicago can choose to only go after people within a 10-mile radius, or an e-retailer focused on teenage girls can target women between the ages of 13 and 18. Meanwhile, hotel chain Marriott is able to find its rewards members in the Bay Area and run promotions tied to this weekend’s Super Bowl in Santa Clara.
“Targeting is the great equalizer to allow advertisers of all shapes and sizes to perform well,” said Graham Mudd, Facebook’s director of ads product marketing. “If prices go up, that’s typically a reflection of the fact that we’re able to deliver more value.”
dollars. Ahead of Advertising Week in September, Facebookintroduced a tool that allows brands to roll out a combined TV and Facebook campaign, with Nielsen verifying delivery of the ads.
The social network also debuted products to improve brand awareness and let advertisers see the effectiveness of their mobile campaigns, and it added video to the carousel format, a succession of ads that users can scroll through on their device.
Karin Timpone, Marriott’s global marketing officer and a former executive at Disney, is going big on Facebook. Unlike SeatGeek, Marriott and most of its 19 brands are universally known, so the company isn’t looking to be discovered or drive app downloads.
Rather, Marriott is out to reach its customers at the right time and place. For a regular business traveler who stays at Marriott hotels, that could mean surfacing a video promoting a vacation stay at a Ritz Carlton luxury resort.
Measurement is where Facebook is particularly powerful. In addition to getting direct feedback on the performance of its ads, Marriott is able to see the specific qualities of a profitable customer and then have Facebook target more people with those characteristics.
Ultimately, it’s all about ROI, or return on investment. In the first few months after the hotel giant started using so-called dynamic product ads to reach customers based on search and travel habits, the company generated $20 in revenue for every $1 spent, according to Timpone.
“For somebody who is really going to geek out on numbers, metrics and ROI, this is game changing,” said Timpone. “We’re trying to widen the scope so it’s not just about intent in that moment but over a lifetime.”
This from a company whose stock slumped after its 2012 IPO because investors doubted its ability to transition to mobile. Now, 1 in every 5 dollars spent on U.S. mobile advertising goes to Facebook, according to eMarketer, and it’s projected to gain share on Google.
Brands are flocking to Facebook because that’s where their customers are. But the social network’s original audience is drifting elsewhere to services like Snapchat, dating app Tinder and Yik Yak, which is popular among college students.
We’ve all heard the stories of kids getting off Facebook after their parents joined. Zuckerberg has addressed that issue directly, buying photo app Instagram in 2012 and shelling out $19 billion two years later for messaging service WhatsApp.
“The major risks are another social platform becomes the `it’ platform,” said Adam Foroughi, CEO of AppLovin, a San Francisco-based company that helps brands advertise on mobile. “But every time that happens, they buy it.” Thus, said Foroughi, “it’s hard to see too many risks on the short-term horizon.”
Modsy CEO Shanna Tellerman doesn’t expect to spend any money on paid marketing for about a year, and when she does Facebook likely won’t be a big channel. Instead, she’s looking at sites specific to furniture and real estate, where consumers are clearly looking to make relevant purchases.
“If you can find a better channel outside the war zone, it’s way better for you as a business,” said Tellerman, who spent two years at Google Ventures before starting Modsy.
According to RBC Capital Markets analyst Mark Mahaney, Facebook is experiencing a similar type of price inflation that Google saw last decade when the advertising world at large discovered the efficiency and effectiveness of search engine marketing.
Mahaney, who has a “buy” recommendation on Facebook, said he’s currently working on a survey to see if advertisers are seeing a change in their ROI as prices rise.
“We haven’t seen it yet, but sooner or later it’s almost inevitable that it will happen,” Mahaney said. “Since it’s an auction, as more and more people come to Facebook, the pricing goes up and ROI gets negatively affected.”